How Has the Stock Market Responded to Jeff Smisek’s Departure from United Airlines?

As you likely know, Jeff Smisek stepped down from his position as CEO of United Airlines on September 8, 2015. This was a shocking endgame for one of the most powerful men in the airline industry. Previously, Jeff Smisek had helped to turn Continental Airlines around, helping it rebound from a low share price of around $2 all the way up to $50.

Jeff Smisek

Given his record of success, I was interested in seeing how the markets would respond to his departure.

UAL Share Prices Since Jeff Smisek’s Departure

As you can see, there was a drop in UAL’s share price (in blue) in the days following his departure, and despite making a recovery a week later, United has trended below both the Dow Jones Index (in red), as well as shares for American Airlines (in teal) and Delta Airlines (in pink).

I am interested in hearing your thoughts on what impact Jeff’s departure from United Airlines might have on the public’s perception of the company, and its long-term share performance. After all, we know how much of the markets are driven by our fears!

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3 comments

PaulOctober 2, 2015 - 7:23 am

I think the problem for most publicly traded companies, United included, is the laser like focus on each quarter. Each quarter one must meet earning projections, or better yet, beat it by a few pennies. This short term focus was both the near term success, and impending long term failure of Jeff and United. Jeff was good at finding savings, but when that wasn’t enough he started squeezing for dollars. That was okay for awhile, but then had nothing else to squeeze, so his focus shifted to his passengers. His now famous “Changes you will like” became synonymous for less service at higher cost…and then no service unless you pay for it. The end result is a horrible airline to work for, and to fly with. The cracks were obvious, but I believe Jeff could have kept this up for a few more years.

Long term, Jeff trajectory was unsustainable. Those flier that could change their airline of choice had started to do so, or became more strategic about it. In my personal case, I fly about 50k miles a year personal and 150k-200k for business. That used to be all United, but soon became just enough to qualify for 1K and the rest went to a competitor. When I looked across the company I work for, this strategy was the norm. United traded long term loyalty for a one quarter financial report.

Jeff had some good ideas and made some changes that had to happen, but went too far on too many fronts. From a stock price perspective, United is at a interesting point. They need to win back their customer. Not just the ones that spend the most, but all of them. What I spend with United is not the totality of my airline spend. What I spend is not the totality of my companies spend. Second, United has a huge labor problem. Its not just the money aspect, but also attitudes and years of built of resentment towards management which is often on display to the customers.

United’s stick price will continue to lag for a few quarters….and that is a good thing. United can either focus on fixing the long term problem (the cancer of the company if you will), or push this horse as hard as it can go and get a few more promising quarters. The new CEO appears to realize the seriousness of the problem, I just hope the United Board does as well and gives him the cover he needs to put this airline back to a sustainable long term growth path.